As is rapidly becoming custom, we start with FX markets, where the USDJPY rose again, recapturing a 115 handle following the BoJ’s 10th bond buying operation of the month.

If we hit 116, the dollar rally could gather some momentum “as the market seems to be short vol above that level,” one European trader told Bloomberg.

Remember, the BoJ has pledged to keep JGB 10s anchored at 0%. The target amount for 5-to-10 year debt was raised to JPY450 billion at Friday’s operation from JPY410 billion earlier this week. Investors were lukewarm when it came to parting with their collateral – the bid-to-cover was 3.66 versus 3.97 previously. “The BOJ’s control is for shorter maturities and the 10 year. Super- long yields are not its target, so it is allowing a curve steepening. If the BOJ can contain the rise in 10-year yields, the increase in super-long yields can also be restrained,” one strategist said on Friday.

Whether or not the long-end can be kept anchored remains to be seen. “What’s become clear is that the BOJ doesn’t want to boost purchases in the super-long maturities,” Barclays said, adding that “it is increasingly likely that super-long maturities won’t be getting support from the BOJ and their yield levels could be elevated depending on external factors. The 10-year sector will likely firm up.”

At least one strategist doesn’t see Friday’s op as particularly important for the currency. “This is not very significant for USD/JPY though – the QE increase is relatively small, and the BOJ was already running a little behind schedule with its operations this month, so there is an element of catch-up here,” Macquarie’s Gareth Berry told Bloomberg.

Maybe not, but it certainly had an impact on Friday:

“Spot desks bought USD/JPY after the BOJ move, triggering stop-loss orders above Thursday’s high of 114.86,” one Asia-based trader said, adding that this could “potentially lead to further momentum buying above 115.60.”

Meanwhile, the peso is struggling to cope with Trump and his wall. The currency extended Thursday’s losses before recovering a bit overnight:

The Turkish lira was back in the spotlight Friday, falling to its lowest level in weeks ahead of a Fitch sovereign ratings review (that’s their last investment grade rating) and amid liquidity ops from CBT, which is forced to deal with ridiculous comments like the following from rates strategist, dictator, President Recep Tayyip Erdoğan:

In Europe, markets are mixed ahead of a meeting between UK PM Theresa May and Donald Trump. Trump will reportedly speak with Angela Merkel by phone on Saturday about Russia (would love to listen in on that call). Putin and Trump are also expected to speak over the weekend.

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice